With the economy and housing market in a state of flux, buyers are feeling less confident about the buying process. This has created an environment of what is known as a seller's market. The majority of buyers want to bid on their perfect home with little competition, so it's important to know what questions they'll ask before you set out making offers. Because in a seller's market, you will likely have a lot of competition with other offers on the table with yours.
By asking yourself these 6 questions that buyers ask in a seller's market, you’ll have a leg up on your competition, and hopefully, your offer will outshine the others on the table. Being prepared will get you into your dream home that much sooner!
Six Questions Buyers Ask In A Sellers Market
How do you win a house in a competitive market?
If you are looking for a new home in a competitive market, there are a few things to know before you start your search. While there are many ways to buy a home in a competitive market, the most important thing is to have an understanding of your budget range. With that knowledge in mind, you will be better equipped to negotiate with real estate agents and home builders. But there are many other factors to consider after you have a budget in mind. Research and know the hidden costs before you set out to look for homes so you know exactly what to expect when the mortgage payments start coming due.
Can I outbid an accepted offer?
Once an offer has been accepted and a contract has been signed, it can not be broken by either party without the permission of the second party. Generally, the seller can't say yes to an offer once they have signed the purchase agreement with another party. Some exceptions in certain contexts and state laws can cause some uncertainty with these regulations.
So a few things to know are:
If the purchase contract hasn't been signed, it's possible that someone else could come in and offer a better deal. This can lead to the original seller accepting the offer rather than yours.
The seller may not cancel your contract solely based on the fact they have a better offer from another buyer.
How do you succeed in a seller's market?
First of all, a good agent on your side is your best tool. Your buying agent will have relationships with financial institutions, inspectors, and even the seller's agent. They will take care of all of the behind-the-scenes drama that might stress you out in the buying process. Your agent is there to help you present the most enticing and strong offer that you can, knowing your financial and living situations.
Being set up for success means having an enticing offer. If at all possible, have all of your bank approvals ready to go. If you have a house to sell and a place to go, try to sell that house to remove that big contingency. If you don’t have anywhere to stay, can you afford to make a non-contingent offer and sell that home later? Removing potential contract-breaking contingencies will set your offer ahead of others when looking at multiple offers. These are all ways that you can make your offer more attractive to sellers.
Does a higher down payment make your offer stronger?
It's a good idea to make a higher down payment to strengthen your offer, but this decision depends on the specifics of your offer. A strong down payment reflects a greater commitment to the purchase. You have more at stake and you have a higher probability of getting approved for a mortgage. Compared to the higher down payment, your interest payments will be less and you'll likely pay a lower interest rate. Before you put all of your money down, it's wise to consider other factors like closing costs, appraisal fees, and lost savings as well as the opportunity cost of not investing in other assets. So think it through and come in with the largest down payment you can.
Do sellers always pick the highest offer?
Some may be surprised by this answer, but it is actually no! Many other factors go into how buyers choose the most attractive offer. They will often assess the risk of a transaction with their agent to decide which offer is the strongest.
For example, Offer A may be $20,000 over asking, but an inspection contingency. Offer B may be $20,000 over, no inspection but have a house to sell as a contingency. Offer C may be only $15,000 over, but have no inspection, no contingencies, and a quick closing.
Offer C is likely to be in the front running since it has the least amount of risk of the contract falling apart. What if a house doesn’t sell in time? Or what if an inspection comes back with a lot of needless repairs at the expense of the seller? What if a closing date is months out, and the deal breaks apart? Any of these scenarios mean the seller has to start at square one and begin the selling process again.
So as you can see, many times, an offer isn’t only favored because it’s higher. Other factors come into play.
How do you not overbid a house?
First of all, know your market. In a seller's market, it’s not uncommon for houses to sell for much higher than the asking price. Knowing what other similar houses have sold for recently in that area is a starting point.
But having a good buyers agent is really your best bet when it comes to making wise decisions about offers. Your agent will advise you on what the market can handle, what the banks will or won’t approve over asking, and whether or not a deal will fall apart if the home sells too far over its value. Having a professional who understands all of the different facets of the process is priceless.
6 questions buyers ask in a seller's market
There are so many variables with selling a home, having a trusted professional to guide you will likely save you stress and money in the process. Before you begin looking for your dream home, have your finances in place, and talk to a few agents so that you can choose one who you feel comfortable with. The agent you choose will be your advocate and will work hard on your behalf for the best outcome.
Knowing these questions that buyers ask in a seller's market before you set out to make offers will give you a leg up on the competition and set you up for success.